Welcome! This blog tracks the real estate market in the Central Shenandoah Valley, featuring market data and analysis, an exploration of common buying and selling questions, and candid commentary on all things real estate.

If you are interested in discussing any of the topics on this blog, or the details of your specific real estate situation, call or e-mail me!

City property owners might see a 16% increase in their real estate taxes!

The owner of a $350K home in the City would pay nearly $500 ($473) of extra real estate taxes each year!?!

This tax increase would result in the owner of a median priced city home paying $26 more in real estate taxes each month.

I'm guessing that if you ask most parents of school aged kids in the City if they'd be willing to pay $26 per month such that their child would not be in an overcrowded, not-so-ideal, learning environment for high school, they'd likely be quick to say yes.

That said, this $26 per month increase would need to be paid for 25 years -- but for a parent of a child in the school system, I'm guessing that would still seem to be a reasonable cost.

I'm also guessing that City property owners who do not have children in the local school system would LOVE for their property taxes to NOT increase. And I'll even go a step further -- I am guessing that they don't really want school aged children to have an overcrowded, not-so-ideal, learning environment -- it's probably just more about the increased tax burden.

Anyhow. Numbers are funny.

Read today's Daily News Record article, and feel free to form your own opinions. There seem to be plenty of them circulating through our community about this topic. :)

Forget about what actually SELLS in any given timeframe, or even what is available FOR SALE at any given point in time. Let's get down to what housing actually EXISTS in the City of Harrisonburg.

The graph above shows the number of single family detached homes (Use Code 006 in the City's property database) that exist in the City of Harrisonburg in five different price ranges. The homes are sorted into these price categories based on their 2017 assessed values.

So -- what surprises you?

If more single family homes are to be built in the City, what price range should they fit into?

Per a reader's request, I have updated this super-long historical context of real estate tax rates in the City of Harrisonburg.

This graph can be a bit deceiving in its attempts towards being legible -- the y-axis does not start at zero. As such, it makes some of the historical tax rates (around $0.60) seem closer to zero than they really are.

That said, the trajectory of the real estate tax rate over the past five-ish years is quite striking in a historical context.

OF NOTE -- the 2017 value ($1.025 per $100 of assessed value) is a proposed, not approved, tax rate.

The real estate tax rate in the City of Harrisonburg might increase to $0.80 per $100 of assessed value per the City's proposed 2016-17 budget. As shown above, this would be a 36% increase in the tax rate over a five year period.

The context that might be missed by just looking at this increase includes....

The proposed $0.80 rate is what is required to balance the budget. That might end up being lower depending on a variety of funding decisions that City Council might make.

One of the main reasons for this increase is because two new schools are being built in the City of Harrisonburg. Bluestone Elementary School and Elon Rhodes Early Learning Center -- both of which will be built over the next year to open in Fall 2017.

The population of Harrisonburg keeps on growin -- at a pace of approximately 1,000 people per year. Providing services to an ever increasing population is increasingly expensive.

Real estate revenue could go up without increasing the tax rate -- if lots of new houses were being built (brand new tax revenue) or if home values increase (higher tax revenue). In the past year, the MLS only shows 25 new home sales in the City of Harrisonburg -- and the median sales price of a single family home in the City has only increased 1.2% over the past year.

Interested in knowing more?

Read today's article in the Daily News Record (City Eyes Tax Hike In Budget Proposal) or attend the public hearing on the budget this evening at the City Council meeting at 7PM in City Hall Council Chambers.

The City of Harrisonburg has released its proposed budget for the 2016-2017 fiscal year, and it includes a proposed $0.08 increase in the tax rate from $0.72 per $100 of assessed value up to $0.80 per $100 of assessed value.

A few excerpts of note from the City Manager's letter to City Council are included below. The bold sections are directly from the letter.

City costs are increasing as population increase, even without increases in services....As noted last year, the impact of a growing community continues to have a significant effect on our budget. That trend continues this year as we added another 1,263 new residents as of July 1, 2015 per the Weldon Cooper Center population estimates. I have stated in my budget transmittal letter for several years that even if we are not adding new services or programs, we have more people needing/consuming the services, programs, and facilities that we already provide, and we have added more infrastructure to be operated and maintained (streets, sidewalks, bike trails, emergency communications, juvenile and adult detention facilities, athletic fields, etc.) in support of our services and programs.

Large new costs for 2016-17 include:

New Elementary School

New Pre-K Facility

Renovating a 40-year old fire station

Replacing a bridge that serves a major industrial area

Replacing a boiler at the jail

Minor renovations at the courthouse

Replacing a 51-year old water tank in the Park View area

And, as the City Manager points out...

Natural revenue growth, while increasing, has not kept pace with the costs of all of the immediate needs.

Lots of new costs without significant new revenue resulted in a recommendation for increasing the real estate tax rate....

As City staff developed the budget, they had a gap of about $7.5 million between revenues and expenditures.

We began the development of the FY 16-17 general fund budget with a gap of about $7.5 million between anticipated revenues and expenditures. To varying degrees, all of the submitted requests had merit and were intended to address what department directors and management felt to be present or pending needs for providing services to our citizens.

This budget does not include any increases to any of the "discretionary" outside agencies (listed as "Contributions – Community and Civic Organizations" in the budget) that receive City funding, nor does it propose adding any new agencies, programs or projects for funding.

We attempted to build this budget based on available projected revenues and not expenditure requests, starting with a base revenue budget of just under $102 million (which included about $1.6 million in new revenue), less any use of fund balance. In spite of this effort, to meet the commitments we have in core service areas, a $3.15 million gap remains. As such, management believes an increase of approximately $0.08 in the real estate tax rate will be required to balance the FY 16-17 budget, pending Council direction as to other possible budget revisions or identification of reduction targets.

The draft budget (and above-referenced letter, and supporting documentation) can be found here ("2017 Proposed Budget"). Next, the budget will be reviewed by City Council and opportunities will exist for public comment.

The list above shows the 50 properties in Harrisonburg with the highest assessed values per the 2016 assessments. As you can see, JMU, apartment complexes and City schools are many of the most valuable properties.

I recently created HarrisonburgAssessments.com, which analyzes the relationship between sales prices and assessed values. And then it hit me -- what if we compared list prices to assessed values -- might we find the best buying opportunities in and around Harrisonburg?

Are the 30 properties on this new website REALLY the best deals in Harrisonburg? Possibly.

The properties featured on BestDealsInHarrisonburg.com are being offered at a low list price compared to their assessed value. This is likely to mean that they are a "good deal" -- though if their assessed value happens to be high (relative to their market value) then the deal won't be as sweet.

As always, consult a Realtor (such as myself) for expert advice on whether any particular property really is a great deal. BestDealsInHarrisonburg.com is simply shuffling some good prospects to the top of the pile for your consideration.

Under the fiscal 2015 proposal to raise the rate 6 cents, the owner of a city home valued at $ 150,000 will pay $ 1,035 in real estate taxes, compared to $ 945 now. A house valued at $ 200,000 will be taxed at $ 1,380 next year, according to the draft. That owner pays $ 1,260 now.

It's that time of year again, when homeowners (at least in the City of Harrisonburg) are receiving notices of the reassessment of their property. As you strive to understand the new (or current) assessment of your property, let's have a brief refresher course on real estate assessments. First, many people (erroneously) believe that the assessment of their property is an indication of their home's value. In actuality, the assessed value of a property is the value assigned to the property by the local assessor's office, for the purpose of determining how much you will pay in taxes. Certainly, the assessed value is intended to be the precise value of your home – but it is quite possible that there is a disparity in this assessed value and market value. The market value of your home is the price at which it would sell in the current market.

Sales Prices vs. Assessed Values in the City of Harrisonburg

To better understand how assessed values relate to market value, I checked on the 2014 assessed value for each of the 328 properties that sold between January 1, 2013 and November 30, 2013. What I discovered, is that properties in the City of Harrisonburg sold, on average, for 97% of their assessed value. Looking a bit deeper, just over a third of City properties (39%) sold within 5% of their assessed value – the remaining 61% had a sales price that was more than 5% higher or lower than the assessed value.

Sales Prices vs. Assessed Values in Rockingham County

Performing the same analysis in Rockingham County, we discover that County properties are selling for slightly more than their assessed value (average of 106%) as compared to City properties that are selling for a bit less than their assessed value (average of 97%).

Given the great variation in assessed values and market values, homeowners should not rely on their tax assessment for an understanding of their property's value. Furthermore, home buyers should not rely on assessed values to guide them in understanding the market value of a home that they might purchase. Both buyers and sellers should strive to understand the market value of a particular piece of real estate my analyzing similar homes that have recently sold and those currently on the market in a given neighborhood or price point.The relationship between assessed values and sales prices varies based on the price, size, age and location of the home. For a more thorough analysis of the topic, visit HarrisonburgAssessments.com.

The ASSESSED VALUE of a property is the value assigned to the property by the local assessor's office, for the purpose of determining how much you will pay in taxes.

The MARKET VALUE of a property is the price at which a property would sell in the current market.

As shown above, properties in the City of Harrisonburg tend to sell for a bit less than their assessed value.....while properties in Rockingham County tend to sell for a bit more than their assessed value.

However -- there is a great deal of variance --- explore the data via...

As reported in today's Daily News Record, assessed values in the City of Harrisonburg stayed relatively stable over the past year. As shown above, the average assessed value of single family homes decreased 1% over the past year from $235,000 to $231,900. In the same time period, average sales prices increased by 3%.

A few clarifying notes....

The average assessed values are typically higher than average sales prices because the average assessed value includes all single family homes in the City, and the average sales price only includes those that have actually sold.

The reporting time frame for the two metrics shown on the graph above are a bit different based on the timing of the assessments, but you can still draw some general conclusions about trends.

New assessed values have been calculated for the City of Harrisonburg. These new assessed values will determine the property taxes that each property owner will pay in 2013 --- and the values are based on sales data from the previous year.

Harrisonburg has 12,531 taxable parcels, and roughly 9,000 of those parcels will see a change in their assessed values (and thus property taxes) for 2013.

How does this 1% overall decline in City property values compare to what we've seen in the Harrisonburg Rockingham Association of Realtors Multiple Listing Service (HRAR MLS)?

The median sales price of all properties in the City of Harrisonburg during 2011 was $164,413 (per the HRAR MLS).

That figure declined to $159,500 based on sales thus far in 2012 (per the HRAR MLS).

Thus, the HRAR MLS shows a 2.9% decline in residential property values between 2011 and 2012 --- so an overall 1% decline in all City property values seems to be very close to what we have seen in HRAR MLS sales data. In fact, looking closer at the City data, they break it down as follows:

Single Family Homes - down 2%

Townhouses - down 2.5%

Condominiums - down 8%

This 1% decline in assessed values may or may not be accompanied by a change in Harrisonburg's property tax rate. That rate increased from $0.59 (per $100) to $0.63 (per $100) effective July 1, 2012. City Council will discuss the property tax rate when the City develops the 2013/2014 budget.

As published yesterday in the Shenandoah Valley Business Journal. Scroll beyond the article for two helpful infographics.

Many people believe the assessment of their property istheir home's value.In actuality, theassessed value of a property is the value assigned to the property by the localassessor's office, for the purpose of determining how much you will pay intaxes. Certainly, the assessed value is intended to be the precise valueof your home – but quite frequently there is a disparity in this assessed valueand market value.The market value ofyour home is the price at which it would sell in the current market.

Of interest, the City of Harrisonburg real estateassessments are currently a bit more accurate than those in RockinghamCounty.As can be seen in theinfographic, homes sold during 2011 in the City of Harrisonburg sold for 95.1%of their current assessed value.Breaking it down further, 64% of the homes that sold during 2011 in theCity of Harrisonburg sold at a lower price point than their assessed value.This is an indication that many City propertyassessments are likely a bit too high.

In Rockingham County, most property assessments are too low –as 70% of properties that sold in 2011 sold for more than their assessed value– and on average, properties sold for 110% of their assessed value.Of note, homes in the City of Harrisonburgare re-assessed every year, while homes in Rockingham County are onlyre-assessed every four years.In thepast, this has resulted in lower than expected assessments in Rockingham Countydue to the infrequent updates to their assessed values.

Given the great variation in assessed values and marketvalues, homeowners should not rely on their tax assessment for an understandingof their property's value.Furthermore,home buyers should not rely on assessed values to guide them in understandingthe market value of a home that they might purchase.Both buyers and sellers should strive tounderstand the market value of a particular piece of real estate my analyzingsimilar homes that have recently sold and those currently on the market in agiven neighborhood or price point.

The City of Harrisonburg is considering increasing the real estate tax rate from $0.59 per $100 of assessed value to $0.63 per $100 of assessed value. Rockingham County is also considering a $0.04 increase, from its current tax rate of $0.60 per $100 of assessed value to $0.64 per $100 of assessed value.

To understand the potential rationale behind such an increase, let's examine funding levels given a few assumptions to make the math a bit easier. First, we will assume that all tax assessments are at exactly 100% of the market value of properties. Second, we will assume that both Harrisonburg and Rockingham County are comprised of 1,000 privately owned homes. Third, we will assume that all homes have market values (and assessed values) of the median sales price.

As shown in the table above, the median sales price in the City of Harrisonburg declined 20% between 2008 and 2012 from $213,500 to $170,000. If the City of Harrisonburg were comprised of 1,000 median-priced homes, the tax base and thus the tax revenue would also decline by 20% from $1.26M to $1M. Even with the proposed $0.04 proposed increase in the tax rate (from $0.59 to $0.63) the tax revenue would still decline by 15% from $1.26M to $1.07M. In fact, the tax rate would need to increase to $0.74 (a 25% increase) in order to maintain the same tax revenue as in 2008 --- assuming that assessed values have tracked precisely with median sales prices.

As shown in the table above, the median sales price in Rockingham County declined 20% between 2008 and 2012 from $215,000 to $171,750. If Rockingham County were comprised of 1,000 median-priced homes, the tax base and thus the tax revenue would also decline by 20% from $1.29M to $1.03M. Even with the proposed $0.04 proposed increase in the tax rate (from $0.60 to $0.64) the tax revenue would still decline by 15% from $1.29M to $1.1M. In fact, the tax rate would need to increase to $0.75 (a 25% increase) in order to maintain the same tax revenue as in 2008 --- assuming that assessed values have tracked precisely with median sales prices.